United States International Trade Commission Raises Domestic Industry Requirement For Non-Practicing Entities

Managing Intellectual Property | March.17.2014

Life just got a little more difficult for non-practicing entities (“NPE”) in the United States International Trade Commission (“Commission”). Overturning decades-old precedent, the Commission has held that a complainant alleging the existence of a domestic industry based on licensing under 19 U.S.C. § 1337(a)(3)(C) must demonstrate that articles practice the asserted patents. Certain Computers & Computer Peripheral Devices, & Components Thereof, & Prods. Containing Same, Inv. No. 337-TA-841, Comm’n Op. at 40 (Jan. 9, 2014) (hereinafter, “Certain Computers”); see also Certain Computers, 78 Fed. Reg. 78,382, 78,383 (Dec. 26, 2013).

As background, to obtain relief under Section 337, complainants must prove that a domestic industry exists or is in the process of being established in the United States.  19 U.S.C. § 1337(a)(2)-(3). One way a patent holder can satisfy this requirement is by demonstrating a substantial investment in licensing the asserted patents.  19 U.S.C. § 1337(a)(3)(C). For over a decade, the Commission had held that a complainant seeking to prove domestic industry through licensing need not show that either it or its licensees actually practiced the asserted patents. See Certain Computers, Dissent at 8 (Aranoff, Comm’n); see also Certain Computers at 27-28 & n.21. Licensing activity in the United States could be enough.

Certain Computers overturned this precedent. The complainant, Technology Properties Limited, LLC (“TPL”), sued 21 respondents for allegedly infringing six patents. The Administrative Law Judge (“ALJ”) issued an Initial Determination (“ID”) finding that TPL’s licensing investments satisfied the domestic industry requirement, even though TPL could not prove that it or its licensees used the patents in the United States.

The Commission reviewed the ALJ’s ID in light of two recent Federal Circuit decisions – InterDigital Commc’ns, LLC v. ITC, 707 F.3d 1295 (Fed. Cir. 2013) and Microsoft Corp. v. ITC, 731 F.3d 1354 (Fed. Cir. 2013). See Certain Computers, 78 Fed. Reg. 64,977, 64,978 (Oct. 30, 2013). The Commission interpreted both Federal Circuit decisions to hold that a complainant must identify an “article” that practices the asserted patents to satisfy the domestic industry requirement even under the licensing prong. See Certain Computers at 32 (citing InterDigital, 707 F.3d at 1297-98); id. at 34-35 (citing Microsoft, 731 F.3d 1361-62).

Based on these two Federal Circuit decisions, the Commission held that “a complainant alleging the existence of a domestic industry under 19 U.S.C. § l337(a)(3)(C) must show the existence of articles” that practice the asserted patents. Certain Computers at 40. Because TPL failed to satisfy this requirement, the Commission terminated the investigation with a finding of no violation.

Thus, Certain Computers continues the trend of Federal Circuit and Commission decisions that have raised the domestic industry threshold for NPEs. By definition, NPEs do not practice the asserted patents. Now, it appears that an NPE’s licensing activity, alone, may not be sufficient to establish a domestic industry unless it also proves that its licensees’ products practice the asserted patents.
 
By Bas de Blank and Jordan Coyle

This article was originally published in Managing Intellectual Property in March 2014.